After Monadelphous Group Limited’s (ASX:MND) recent earnings announcement in June 2018, the consensus outlook from analysts appear bearish, with profits predicted to drop by -12.0% next year. However, this is still an improvement on its past 5-year earnings growth rate of -23.7%, on average. Currently with a railing-twelve-month profit of AU$71.5m, the consensus growth rate suggests that earnings will drop to AU$62.9m by 2019. Below is a brief commentary on the longer term outlook the market has for Monadelphous Group. For those interested in more of an analysis of the company, you can research its fundamentals here.
How will Monadelphous Group perform in the near future?
The 12 analysts covering MND view its longer term outlook with a positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of MND’s earnings growth over these next few years.
This results in an annual growth rate of 8.4% based on the most recent earnings level of AU$71.5m to the final forecast of AU$88.3m by 2021. This leads to an EPS of A$0.96 in the final year of projections relative to the current EPS of A$0.76. Growth in earnings appears to be a result of cost-cutting initiatives, since top-line is predicted to rise at a slower pace than earnings. Margins is currently sitting at 4.1%, which is expected to expand to 4.4% by 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Monadelphous Group, I’ve put together three key factors you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Monadelphous Group worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Monadelphous Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Monadelphous Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.